Advance/Decline Line

The Advance/Decline Line is a popular market breadth indicator that helps investors track the overall market sentiment. It does so by showing the net difference between the number of advancing and declining stocks in a specific index. Calculation Process: 1. Count Advancing Stocks: Determine how many stocks have increased in value (finished in the green). 2. Count Declining Stocks: Determine how many stocks have decreased in value (finished in the red). 3. Calculate Net Advance: Subtract the number of declining stocks from the number of advancing stocks to find the net advance. - Net Advance = Advancing Stocks - Declining Stocks 4. Add the Net Advance to the Previous Day's Net Advance: The Net Advance is added to the previous day's value to maintain the cumulative total. 5. Repeat the Calculation Daily: Continue calculating and adding the Net Advance daily to build the line. Interpretation: - Rising Advance/Decline Line: Indicates a healthy, bullish market, with more stocks advancing than declining. - Falling Advance/Decline Line: Suggests weakening market breadth, often signaling a bearish market trend or potential reversal. This indicator can provide valuable insights into the strength or weakness of market trends, with the ability to detect trend reversals early based on changes in market breadth.